AFK Sistema

Environmental & Social Information • Jun 21, 2021

Sistema PJSFC

Report on Payments to Governments for the year 2020

Table of Contents

1 INTRODUCTION 3

2 REPORTING PRINCIPLES 4

Legislation	4
Scope and Reporting entities		4
Government	5
Project definition 5
Reporting currency and materiality			5
Payment types	6

3 CONSOLIDATED OVERVIEW OF PAYMENTS TO GOVERNMENTS 7

				3.1 - Payments per government 7
--	--	--	--	---------------------------------	--

3.2a - Payments per project 8

3.2b - Payments per entity level 10

CONTACT INFO 11

1 Introduction

This Report provides an overview of the payments to governments made by subsidiary undertakings of Sistema PJSFC (hereinafter referred to as 'Sistema'), represented by Segezha Group PJSFC and its subsidiaries (together hereinafter referred to as 'Segezha Group'), for the year 2020 as required under the "Disclosure Rules and Transparency Rules" of the United Kingdom.

The "Disclosure Rules and Transparency Rules" were introduced by the Financial Conduct Authority of the United Kingdom to increase transparency in the extractive and logging sectors. The Rules are applicable for the companies in the extraction and logging of primary forest industries whose transferable securities are admitted to trading on the London Stock Exchange. Sistema is required to be compliant with these Rules since its subsidiary undertakings (Segezha Group) are involved in logging of primary forest activities and its global depositary receipts are listed on the London Stock Exchange.

The Report is to be prepared in accordance with the UK's Report on Payments to Governments Regulations 2014 (SI 2014/3209) and Chapter 10 of the Directive 2013/34/EU (the EU Accounting Directive (2013)).

A primary goal of the enacted transparency regulation is to help empower citizens of the resourcerich countries to hold their governments accountable for the wealth generated by those resources.

This Report is available for download from www.sistema.com

2 Reporting principles

Legislation

This Report is prepared in accordance with the Reports on Payments to Governments Regulations 2014 as enacted in the UK in December 2014 and as amended in December 2015.

Scope and Reporting entities

Sistema has prepared a consolidated report on payments to governments for activities related to logging of primary forest (hereinafter referred to as 'logging activities'). In this Report, we only disclose payments to governments made by legal entities of Segezha Group involved in logging activities.

Segezha Group carries out logging activities only in Russia, the legal entities active in logging activities operate in five Russian regions – republic of Karelia, Arkhangelsk, Kirov, Vologda and Krasnoyarsk region (please see the map of Segezha Group logging operations as of 31 December 2020).

Government

In the context of this Report, government means any national, regional or local authority of a country. It includes a department, agency or entity that is a subsidiary of a government controlled by that authority.

Project definition

Payments are reported at project level except that payments that are not attributable to a specific project are reported at entity level. Project is defined as operational activities which are governed by a single contract, license, lease, concession or similar legal agreement, and form the basis for payment liabilities with a government. If such agreements are substantially interconnected, those agreements are to be treated as a single project. According to the regulation, 'substantially interconnected' means that the agreements are governed by a single overarching agreement, that the agreements have substantially similar terms, and that the agreements are geographically and operationally integrated.

Reporting currency and materiality

All payments to governments in this Report are presented in thousands of Russian Roubles (RUB).

For each payment type, total payments below GBP 86,000 to a government whether made as a single payment or as a series of related payments need not to be disclosed. For the purposes of this Report a threshold of RUB 8,603,655 (approx. GBP 86,000) was applied to exclude payments from the scope of disclosure.

Payment types

The following payment types are disclosed for legal entities involved in logging activities.

• Taxes levied on the income, production or profits of companies, which include corporate income tax. Consumption taxes such as value added tax, personal income taxes or sales taxes, withholding taxes, property taxes and environmental taxes are excluded;
• Feespaid for rent of land plots;
• Royalties. For the purposes of this Report 'royalties' include export customs duty paid under export sales of wood.

The payments are presented on a cash basis.

For the year ended 31 December 2020, there were no reportable production entitlements, dividends, bonuses or payments for infrastructure improvements.

3 Consolidated overview of payments to governments

All reportable payments relate to logging activities in Russia.

The consolidated overview below discloses the sum of payments to governments in Russia related to logging activities:

• 3.1 per government (all payments),
• 3.2a per project (only fees for rent of land plots),
• 3.2b per entity level (all other payments except rent fees).

3.1 - Payments per government

(Thousands of Russian Roubles)

	Taxes	Royalties	Fees	Total
Federal budget of the Russian Federation	78,331	25,826	636,613	740,770
Regional budget of Arkhangelskaya oblast	150,167	0	35,355	185,522
Regional budget of Vologodskaya oblast	210,813	0	30,057	240,870
Regional budget of Karelia	18,486	0	163,037	181,523
Regional budget of Kirovskaya oblast	27,608	0	22,538	50,146
Regional budget of Krasnojarskij kray	23,296	0	7,682	30,978
Total	508,701	25,826	895,282	1,429,809

3.2a - Payments per project

(Thousands of Russian Roubles)

	Taxes	Royalties	Fees	Total
1. Onega	0	0	77,900	77,900
1.1. Onezhskoe forestry	0	0	68,136	68,136
1.2. Priozernoe forestry	0	0	2,608	2,608
1.3. Severodvinskoe forestry	0	0	7,156	7,156
2. Vologda	0	0	141,980	141,980
2.1. Vozhegodskoe forestry	0	0	2,054	2,054
2.2. Vytegorskoe forestry	0	0	45,565	45,565
2.3. Kirillovskoe forestry	0	0	3,217	3,217
2.4. Sokolskoe forestry	0	0	6,317	6,317
2.5. Syamzhenskoe forestry	0	0	29,265	29,265
2.6. Babushkinskoe forestry	0	0	20,406	20,406
2.7. Kharovskoe forestry	0	0	21,116	21,116
2.8. Cherepovetskoe forestry	0	0	5,846	5,846
2.9. Kargopolskoe forestry	0	0	8,139	8,139
2.10. Ust-kubinskoye forestry	0	0	55	55
3. Karelia	0	0	481,905	481,905

3.1. Belomorskoe forestry	0	0	25,832	25,832
3.2. Kostomukshskoe forestry	0	0	87,443	87,443
3.3. Muezerskoe forestry	0	0	158,003	158,003
3.4. Medvezh'egorskoe forestry	0	0	115,722	115,722
3.5. Segezhskoe forestry	0	0	36,359	36,359
3.6. Kaleval'skoe forestry	0	0	41,678	41,678
3.7. Ladvinskoe forestry	0	0	11,010	11,010
3.8. Pudozhskoe forestry	0	0	5,858	5,858
4. Kirov	0	0	48,212	48,212
4.1. Kirsinskoe forestry	0	0	6,721	6,721
4.2. Nagorskoe forestry	0	0	16,345	16,345
4.3. Nemskoe forestry	0	0	13,352	13,352
4.4. Sinegorskoe forestry	0	0	577	577
4.5. Falenskoe forestry	0	0	2,046	2,046
4.6. Omutninskoe forestry	0	0	9,171	9,171
5. Sibiria	0	0	145,285	145,285
5.1. Gremuchinskoe forestry	0	0	20,689	20,689
5.2. Kodinskoe forestry	0	0	30,241	30,241
5.3. Motiginskoe forestry	0	0	12,198	12,198

5.4. Nevonskoe forestry	0	0	17,324	17,324
5.5. Nizhne-Enisejskoe forestry	0	0	24,155	24,155
5.6. Enisejskoe forestry	0	0	39,919	39,919
5.7. Khrebtovskoe forestry	0	0	759	759
Total	0	0	895,282	895,282

3.2b - Payments per entity level

(Thousands of Russian Roubles)

	Taxes	Royalties	Fees	Total
AO "LK "Kipelovo"	236,177	25,826	0	262,003
AO "Onezhskij LDK"	176,718	0	0	176,718
OOO "Vjatskij fanernyj kombinat"	32,447	0	0	32,447
AO "Segezhskij CBK"	27,272	0	0	27,272
AO Lesosibirskij LDK №1	22,858	0	0	22,858
AO "Sokol'skij DOK"	11,993	0	0	11,993
Other entities	1,236	0	0	1,236
Total	508,701	25,826	0	534,527

Contact info

Sistema PJSFC

13, Mokhovaya Str., Moscow 125009

www.sistema.com

tel: +7 (495) 737-01-01